Czech Economy Expands Strongly in Q2 2007

The Czech Republic's economy expanded an annual 6 percent rate in the second quarter on the back of strong household spending and investment growth according to data released today by CSU, the Czech statistical office. The growth rate, which has been at 6 percent or over for nine consecutive quarters, compares with a revised 6.4 percent pace in Q1.

The Czech central bank has raised interest rates three times so far this year due to concern about the pace of household consumption growth. Czech household consumption rose 6.5 percent in the second quarter, the second-highest growth rate in nearly four years, compared with 7.2 percent in the first three months of the year. Gross fixed investments rose at an annual 4.2 percent, according to the statistical office, while inventories rose by 44.1 billion koruna from a year earlier. Imports of goods and services, calculated in constant prices, rose 13.9 percent from a year earlier, outpacing exports which recorded 13.8 percent growth.

Government spending fell 1.6 percent in the April-June period.

In the second quarter, retail sales grew an average 7.4 percent, compared with an average 9.4 percent in the first three months of the year.

Real wages grew 4.9 percent in the second quarter, slower than 6.3 percent in the first three months of the year. The unemployment rate in June reached 6.3 percent, the lowest since the data series was started in 2004.

The Finance Ministry estimates growth at 5.8 percent this year and 5 percent in 2008.